Merrill Combines Business Units
Byline: Shanny Basar
While rival investment banks have combined their debt and equity capital markets teams, Merrill Lynch has taken a different tack and wants to more closely align its origination business across all financial products.It has formed a global capital markets and financing group by separating debt and equity capital markets from sales and trading and combining them with corporate finance. This excludes the relationship bankers who in Europe report to Philip Yates, head of European investment banking.
Jeff Edwards, former global co-head of equity capital markets (ECM), is in charge of the new group while his former co-head, Dante Roscini, is the head of capital markets and financing for Europe, the Middle East and Africa (Emea) and chairman of global ECM. Roscini stresses that Merrill intends to keep separate product expertise and does not aim to physically seat the teams together but to co-ordinate their activities and manage the origination business from one budget. He says: "We are not going to dismantle the product groups and jam them together, as DCM and ECM need to keep their proximity to sales and trading."
Last year, Merrill combined its corporate broking team into ECM and Roscini hopes the new group will replicate the success of this integration on a broader scale across Europe. He says: "Creating a link between ECM and corporate broking has improved our delivery mechanism and we have led more convertible bonds for our broking clients than any other broking firm."
In the UK Merrill is corporate broker to 31 FTSE 100 clients, eight of which it has added this year. The bank used to have three heads of corporate broking but only Rupert Hume Kendall remains after Stephen Robinson left the bank in May. Hume Kendall says: "The proximity of ECM and corporate broking works well and is evidence of the integration that we have worked on together in the past."
In the equity-linked market, Merrill has led deals this year for broking clients such as 3i, the UK-listed private equity firm, LogicaCMG, the merged Anglo-Dutch technology and mobile telecoms consultancy and Carnival Corporation, the US-UK listed cruise group. In the equity market the bank led an accelerated bookbuild for WPP Group, the UK advertising company, and the [pounds sterling]1.3bn ([euro]1.8bn) initial public offering (IPO) of Yell, the UK directories business, with Goldman Sachs. Hume Kendall says: "We have changed the way investors look at IPOs. We identify the critical investors for each deal and communicate with them early and actively. The results we have enjoyed have endorsed this activity and helped the IPO market to reopen."
Before launching the Yell offer, 15 investors said they were happy to buy enough stock to cover the book. A month earlier, Merrill had visited investors to discuss the [pounds sterling]181m IPO of Benfield Group, the UK reinsurance broker, in a deal it jointly led with Morgan Stanley. Hume Kendall says: "In the Benfield deal we visited the top potential UK buyers of the stock and asked them if they were open to IPO ideas and all of them came through."
The deals give Merrill a European ranking of ninth in European ECM this year, according to Dealogic, the investment banking research firm. This compares with a rank of eighth last year against first in 2001. Roscini says: "The race is not over until it is over. …